Some parents will tell you firsthand there’s no expiration date on this raising kids gig. For some, that means they extend financial help to their kids into adulthood. When I was 21 and got into a master’s program at a college of my dreams, my mom swooped in to help me pay for my degree. Many parents have been kind enough to do this and more.
When I say “many,” I’m backed up by a 2023 survey from Savings.com that found 45% of parents with a child 18 or older spend an average of over $1,400 per month supporting their kids financially, excluding adult kids with disabilities.
But is this financial support always a good idea? A certified financial planner and a therapist who both have experience in this department share their thoughts.
WHY PARENTS SUPPORT ADULT KIDS
There are many reasons a parent may choose to support their adult kids. Disabilities and wanting to help them achieve major life milestones are a couple. Shelmeshia Hill-Brown, the CEO of Wholistic Resolutions LLC in Chesapeake, Virginia, is a social worker and therapist who works with parents who financially support their adult kids. A major theme she sees is parents helping pay for school, especially since the pandemic. Buying a home and exploring infertility treatments are other reasons her clients financially support their kids.
While some parents offer financial support because they want to, others feel obligated even when it’s financially inconvenient. Sometimes, the obligation stems from guilt of not preparing their kids for financial independence early on, Hill-Brown says.
“They didn’t do that one-on-one time with them, to sit down and actually teach them,” she says. “But a lot of that also stemmed from, it never (being) done with them, as well, so they were learning along the way, and it made it a little bit more challenging to sit down and come up with a plan to implement with their own children.”
RISKS OF SUPPORTING ADULT CHILDREN
Supporting your kids can be satisfying, but it also may be detrimental if you’re not financially secure. It also can affect retirement savings, which many Americans already have concerns about. Fidelity’s 2023 Retirement Savings Assessment tells us 52% of American households may not be able to cover essential expenses in retirement. And roughly 50% even plan to work during retirement.
Nonetheless, some parents think about dipping into their savings so their adult kids don’t have to take out loans, says Kayla Walter, a certified financial planner at Bailey Wealth Advisors in Silver Spring, Maryland. She advises clients against that, seeing as there are student loans, but no loans for retirement.
“You’re blowing through your savings at a much faster rate, and it’s not going to last you as long as maybe you intend to live,” she says.
PROTECTING YOUR FINANCES AND RELATIONSHIP
The risk in providing for adult kids is twofold: It can affect your finances and relationship. Yes, it may give you a sense of purpose and make you feel connected to your child, but it also can cause resentment, says Hill-Brown.
“There are some (parents) who actually find themselves in a financial bind because they were not open with their own financial responsibilities and how it would be impacted,” she says. “And that’s where that resentment and guilt takes place as a result.” She adds that resentment can happen even for parents who can afford to support their kids.
To protect your finances, make sure you can afford to extend help to your kids before saying yes, and know your limits. You can then communicate these limits with your child. For those who have kids who are financially dependent on them, gradually reduce support and set boundaries around how financial support will look moving forward, Hill-Brown says. Also, be willing to say no when necessary.
If you’re feeling guilty about it, keep in mind that financial support without limits could keep your child from becoming financially independent, which is something Hill-Brown says they could then pass on to the next generation.
ENCOURAGING FINANCIAL INDEPENDENCE
After setting those financial boundaries, you can start steering your child toward financial independence.
One way to help do this is by bringing them into your finances, Walter says.
“If they’re feeling like they didn’t do enough for their children, a good time to kind of help them learn more about finances would be bringing them into the meeting with your adviser and make it a family meeting so that way they can see what’s going on,” she says.
Another option is to point adult kids to financial services that can help. For instance, instead of loaning them money if they’re in serious debt, you could direct them to a debt consolidation service. Additionally, the Consumer Financial Protection Bureau has an abundance of resources.
Fidelity’s 2023 Retirement Savings Assessment methodology:
The findings in this study are the culmination of a year-long research project that analyzed the overall retirement readiness of American households based on data such as workplace and individual savings accounts, Social Security benefits, pension benefits, inheritances, home equity and business ownership. The analysis for working Americans projects the retirement income for the typical household, compared to projected income need, and models the estimated effect of specific steps to help improve preparedness based on the anticipated length of retirement. Data for the Fidelity Investments Retirement Savings Assessment were collected through a national online survey of 3,569 working households earning at least $25,000 annually with respondents (and spouses, if married) age 25 to 75, from August 22 through September 26, 2022. All respondents expect to retire at some point and have already started saving for retirement. Data collection was completed by Versta Research using NORC’s probability-based nationally representative online panel. The responses were benchmarked and weighted against data from the American Community Survey and Current Population Survey conducted by the U.S. Census Bureau and the U.S. Bureau of Labor Statistics. Versta Research and NORC are independent research firms not affiliated with Fidelity Investments. Fidelity Investments was not identified as the survey sponsor.
Fidelity’s Retirement Score is calculated through Fidelity’s proprietary financial planning engine. Of note, Fidelity continually enhances and evolves the retirement readiness methodology, guidance tools and product offerings. This year’s survey processing includes enhancements including, but not limited to, demographic weighting, retirement income projections and social security estimates. This analysis is for educational purposes and does not reflect actual investment results. An investor’s actual account balance and ability to withdraw assets during retirement at any point in the future will be determined by the contributions that have been made, any plan or account activity, and any investment gains or losses that may occur.
Fidelity Investments. (March, 2023). “Retirement Savings Assessment 2023.”
Savings.com methodology:
We surveyed about 1,000 U.S. parents of adult children on whether they pay some of their children’s bills or provide other financial support. Our survey was conducted online in February 2023.
This year, our data distinguishes between adult children with disabilities, which may make it more difficult for them to live independently, and adult children without disabilities. Our analysis focused on parents who contribute financially to their adult children who don’t have disabilities.
To calculate what parents could save for retirement once they stop financially supporting their children, we assumed a 7 percent interest rate for a Roth IRA. We also asked parents how much they contribute to their children monthly and multiplied by 12 to get an annual amount. We asked parents when they plan to stop financially supporting their adult child. If their average annual contribution was more than the allowed contribution to an IRA, we used the maximum allowed annual contribution of $6,500. We calculated how much that allowable maximum investment amount would grow for that same time frame in a Roth IRA. We asked parents when they plan to retire. If their answer was a range, we used the middle of the range (11 – 20 years was calculated as 15 years). Then, we calculated how long their initial investment would remain in the Roth IRA before being withdrawn at retirement (with no further investments).
Savings.com. (March, 2023). “45 Percent of Parents Support Adult Children.”
Elizabeth Ayoola is a writer at NerdWallet. Email: eayoola@nerdwallet.com.
